A Reminder on Chevron in Agency Adjudications (3/25/24)

With the Supreme Court poised to decide the future, if any, of Chevron deference, I hesitated to provide a discussion of a current decision on deference. Still, I thought it would be helpful to do so because the case discussed in this blog involves the application of Chevron deference to agency adjudications which differ materially from the current cases before the Supreme Court involving agency rulemaking. The context for this blog entry is retroactivity in agency adjudicative interpretation which has different features than agency rulemaking interpretation. (That is not to say that whatever the Supreme Court does will not affect appellate review of agency interpretations in adjudications.)

As an aside, I do wonder why courts, such as the Second Circuit in the case prompting this blog entry, are deciding cases on the basis of Chevron deference, rather than postponing them for decision when the current Supreme Court challenges are resolved (probably by the end of May).

As an introduction to today’s discussion, I think it helpful to state the material differences between agency rulemaking and agency adjudications as respects interpretation and retroactive application. In this introduction, I state general propositions in most cases without citations. All of the subjects are covered in my prior article, The Report of the Death of the Interpretive Regulation Is an Exaggeration (last revised 4/8/22), posted on SSRN, here.

In this discussion, I will refer to Chevron deference as the applicable benchmark, but as I have previously discussed, deference to agency interpretations with the key features of Chevron deference was applied long before Chevron. Those key features of are—(i) ambiguity in the statutory text; and (ii) reasonable agency interpretation within the scope of the ambiguity. Supreme Court opinions prior to Chevron stated deference in those terms. See The Tax Contribution to Deference and APA § 706 (December 14, 2023 SSRN 4665227), here.

Agency rulemaking

If the rule is legislative in character, the rule must be promulgated in a notice and comment regulation. The only exception is when the legislative rule is accompanied by a “good cause” statement as to why it should be immediately effective when first promulgated (called an interim final rule in general administrative law jargon and a temporary regulation in tax jargon). The general rule is that, without explicit statutory authority for retroactivity, legislative rules cannot be retroactive prior to the date of promulgation of the rule. (This parallels the general rule that legislation cannot be retroactive.) Legislative rules being the law rather than interpretations of the law are not susceptible to Chevron deference, which tests the reasonableness of an interpretation within the scope of ambiguity in the statutory text. (The statement made by many pundits and even courts that Chevron deference applies to legislative regulations or only to legislative regulations is an oxymoron; making such statements, even by pundits or courts, does not make them true.)

If the rule is interpretive in character, the general rule is that a valid interpretation can be retroactive to the date of enactment of the statute. The concept is that the interpretation merely clarifies an ambiguity in the statutory text within its reasonable scope of interpretation from the date of enactment; the application of the interpretation does not offend due process since all persons to whom the law could apply were on notice that some interpretation of the ambiguous statutory text may be forthcoming; in other words, they did not reasonably rely upon some alternative interpretation. This is the same rule that applies generally to court interpretations of statutes—retroactivity to the date of enactment of the statute.

War Story-Appellate: My Early Brush (1969) with Administrative Law Meaning of Legislative Regulations (3/16/24)

I am starting a new series of procedure-related appellate war stories, mostly from my time with DOJ Tax Appellate Section (1969-1974). The purpose of the series is to tell the war story because it is interesting to me but to do so only when the telling of the story offers some opportunity for students (including for this purpose, practitioners) to learn from the story. I have previously posted some such war stories; all such stories will be under the label “War Story-Appellate", here (the link can be clicked at any time to show all postings).

Today’s War Story-Appellate relates to one of the first cases I handled with DOJ Tax, Davis v. Commissioner, 422 F.2d 401 (6th Cir. 1970), here. I wrote the brief in late 1969; the case was decided in 1970. The substantive issue was whether the taxpayer had proved entitlement to more expenses than allowed by the Tax Court. That is not a tough issue to address and is factual with no precedential importance. The Sixth Circuit addressed it in a one-line per curiam opinion:

On consideration of the files and records in this case, the judgement of the Tax Court is affirmed for the reasons set forth in the Memorandum Opinion of the Tax Court, Tax Ct. Memo 1969-74.

As I have said before in War Story-Appellate, the DOJ Tax Appellate Section did not assign tough cases to relatively new attorneys. I had joined DOJ Tax Appellate in June 1969. I had not yet proved my self capable of handling more difficult cases.

My Davis assignment had a more significant threshold procedural issue that is not addressed in the Sixth Circuit’s one-line per curiam opinion. The issue was (presented in our brief as filed, here, p. 1):

1. Whether this Court has jurisdiction over the merits of this appeal when taxpayer failed to file a notice of appeal until ninety-two days after entry of the Tax Court decision.

Actually, that question was written by my reviewer, Tom Stapleton. In my draft (here), I stated the question as follows:

1, Whether the taxpayer's untimely filing of the notice of appeal from the Tax Court's decision denies this Court from deciding the merits of the appeal.

Tom’s version was better, but still not optimal. How would I improve the question today? Here is my current shot at the best statement of the issue.

1. Whether FRAP 13(a)'s requirement to file notice of appeal within 90 days from the Tax Court decision override the previously enacted statute's (§ 7483) three-month requirement.

Garland v. Cargill-Comments on Briefs and Oral Argument (2/29/24)

Yesterday, the Supreme Court held oral argument in Garland v. Cargill (No. 22-976 docket here, oral argument audio here, and transcript of oral argument here). The ultimate issue is whether “bump stock” devices are within the definition of “machinegun” in the National Firearms Act of 1934, as amended, and the Gun Control Act of 1968. Bump stocks were not devised when the statute was enacted and there is no definitive interpretation of the statutory term “machinegun” that includes or excludes bump stocks. Hence, the job of the regulator or the court in interpreting or applying the term is to determine whether, within the fair bounds of interpretation, the term includes or excludes bump stocks.

At first glance, this issue might call for the application of Chevron deference. Recall that Chevron deference requires two steps—

• Step One where the Court determines whether, on the text alone using proper tools of statutory interpretation, the text resolves the issue. If the text does, the interpreted text applies and there is no deference. If the text does not resolve the interpretive issue and the text is said to be ambiguous.
• Step Two, reached only if Step One does not resolve the interpretive issue, where the court determines whether the agency interpretation is reasonable (also called permissible). If so, the agency interpretation will prevail. Note that I said “prevail” rather than that the agency interpretation receives deference which is the standard Chevron Step Two formulation. Deference is only meaningful when the agency interpretation is not the best interpretation. If, within the zone of ambiguity in the statutory text, the agency interpretation is the better interpretation or even in equipoise as to the best interpretation, applying the agency interpretation is not deference.  See e.g., What is the Best Interpretation for Purposes of Determining a Not Best Interpretation for Chevron Deference? (Federal Tax Procedure Blog 10/21/22; 11/8/22), here.

In the facts of Cargill, the agency interpretation of “machinegun” to include bump stocks was made in the Trump administration in a notice and comment regulation adopting an “interpretive” rule. (I will address the interpretive characterization for the regulation below.) In adopting the regulation, the agency relied on Chevron. In the litigation culminating in Cargill in the Supreme Court, the agency did not rely on Chevron but rather asserted that the interpretation was the best interpretation. (Conceptually, the best interpretation can be determined at Step One or at Step Two (if the agency interpretation is the best in the zone of ambiguity); so it is unclear which Step the government’s reliance on the best interpretation applies.)

At oral argument, apparently because the government was not relying on deference or perhaps the uncertain future of Chevron deference, Chevron or deference was not mentioned. The argument simply addressed whether the text “machinegun” resolved the issue.

Regulations Interpreting Pre-1996 Code Provisions; Fixing Farhy (5/11/23; 5/12/23)

In Farhy v. Commissioner, 160 T.C. No. 6 (4/3/23), TN here and GS here, the Tax Court held that the Code did not give the IRS authority to assess § 6038(b)(1) or (2) penalties, here. Specifically, the Tax Court held that § 6201(a) did not authorize these penalties. I posted some concerns about the correctness of Farhy in a blog. Tax Court Holds that IRS Has No Authority to Assess § 6038(b) Penalties for Form 5471 Delinquencies (Federal Tax Procedure Blog 4/3/23; 4/23/23), here. Is there some possible self-help fix the IRS could use to pre-empt the Tax Court’s Farhy decision?

An interpretive regulation could fix the problem for the IRS. I noted such a fix for the Eleventh Circuit’s opinion in Hewitt v. Commissioner, 21 F.4th 1336 (11th Cir. 2021),  11^th Cir. here and GS here holding an interpretive regulation from the 1980s procedurally invalid for the foot-fault of failing to respond in the regulation to a comment which the Court second-guessed to be material to the rulemaking enterprise. The fix is for Treasury to adopt a replacement interpretive regulation and make it retroactive to the effective date of the regulation or retroactive to some point in between that would pick up all the syndicated shelters currently in the pipeline. Regulations Interpreting Pre-1996 Code Provisions; Fixing Hewitt (Federal Tax Procedure Blog 1/6/22; 5/12/23), here. That proposed fix was anchored in the pre-1996 § 7805(a), which generally unquestionably allowed retroactivity for interpretive regulations and that authority remained for pre-1996 Code provisions.

The same fix can work for § 6201(a). The relevant statutory language is:

The Secretary is authorized and required to make the inquiries, determinations, and assessments of all taxes (including interest, additional amounts, additions to the tax, and assessable penalties) imposed by this title.

That text’s "including" clause should be sufficiently capacious to be read as including provisions not specifically enumerated. § 7701(c) (“The terms ‘includes’ and ‘including’ when used in a definition contained in this title shall not be deemed to exclude other things otherwise within the meaning of the term defined.”) That avoids a dumb result -- Congress imposes a penalty treated generally as a tax without authority to assess which is just a formal recording of a liability Congress clearly meant to impose.

Tax Court in Reviewed Opinion Rejects Chevron and State Farm Attack on § 482 Blocked Income Regulation (2/10/23; 2/15/23)

In 3M Companies v. Commissioner, 160 T.C. ___ No. 3 (2/9/23) (reviewed), TA here and GS here, the Court sustained the IRS so-called blocked income regulations. The opinions (opinion of the court and concurring and dissenting opinions) cover 346 pages. The following is the page breakdown.

• Opinion of the court by Morrison, joined by Kerrigan, Gale, Gustafson, Nega, Ashford, and Marshall): pp. 1-273, with 208 footnotes
• Kerrigan concurring (joined by Gale, Paris, Ashford and Copeland): pp. 275-280, no footnotes
• Copeland concurring in the result joined by Kerrigan, Gale and Paris: pp. 281-286, 1 footnote
• Buch dissenting joined by Urda, Jones, Toro, and Greaves: pp. 287-305, 9 footnotes
• Pugh dissenting, joined by Foley, Buch, Urda, and Toro: p. 306, 1 footnote
• Toro dissenting, joined by Buch, Urda, Jones, Greaves, and Weiler (307-346, 33 footnotes

Judge Toro offers (p. 309 n. 2) this helpful and short statement describing the function of the opinion of the court: “Following the Court’s tradition, I refer to the opinion by Judge Morrison, which received 7 votes (out of 17) from active judges, as the opinion of the Court.” The opinion of the court is not a majority opinion, so what gives? For more on this phenomenon, see Kandyce Korotky, All for One, and Five for Sixteen? When the Tax Court’s “Majority” Opinion Isn’t (Procedurally Taxing Blog 4/10/18), here. [Note: in a subsequent Order in Coca-Cola v. Commissioner (Dkt. No. 31183-15 Order dated 2/14/23), a case on hold pending the outcome of 3M, Judge Lauber asked the Coca-Cola parties to file briefs addressing some issues remaining open after the 3M opinions and describing the 3M split among the judges as follows: "On February 9, 2023, a Court-reviewed opinion was issued in the 3M case, rejecting by a 9-8 vote the taxpayer's Chevron and APA arguments and upholding the validity of the “blocked income” regulation. See 160 T.C. No. 3 (2023)."]

I think it will be most helpful to readers just to offer the Syllabus at the beginning of all the opinion of the court. The Syllabus summarizes the opinion of the court (not the concurring and dissenting opinions): 

Fifth Circuit En Banc Reverses the Bump Stock Regulation By Wobbling Around Statutory Interpretation Issues (Including Chevron) (1/8/23)

In Cargill v. Garland, 57 F.4th 447 (5th Cir. 2023) (en banc), CA5 here and GS here, the Fifth Circuit reversed the prior panel opinion and held that the ATF bump stock regulation interpreting the term "machinegun" to include a so-called bump stock. The holding, one of statutory construction, may be stated as follows: 

• "A plain reading of the statutory language, paired with close consideration of the mechanics of a semi-automatic firearm, reveals that a bump stock is excluded from the technical definition of "machinegun" set forth in the Gun Control Act and National Firearms Act." (Slip Op. 3)
• But, even if the statutory term machinegun were not unambiguous, the statutory term "machinegun" is not ambiguous enough to include bump stocks as a permissible interpretation because of the rule of lenity when criminal consequences might attend, requiring ambiguities to be resolved in favor of the citizen potentially subject to those criminal consequences.

In the course of these core holdings, the en banc majority, concurring and dissenting opinions delve into many topics that I have discussed in connection with the bump stock cases related to Chevron and Chevron-related issues (in a broad sense). I collect at the end of this blog in paragraph 16 some of my earlier Federal Tax Procedure blogs on these issues arising in prior cases involving the bump stock regulations.

I address several key points in the various opinions (the en banc majority, the concurring, and the dissenting opinions).

1. I state at the outset that I believe this commotion about bump stocks is inherently political. Those judges fearing the administrative state (at least in their rhetoric landing them a place on a court) are more likely to reach the decision the en banc majority reached. Those judges whose rhetoric does not include fear of the administrative state and believe that administrative agencies can enrich our society and make it work better are less likely to reach the decision the en banc majority did. Both sides can pull up soundbites masquerading as reasoned decisionmaking to justify the result they prefer. At the end of the day, I think the real issue is whether there can be a symbiotic relationship between Congress, the Executive, and the Courts which together act reasonably to make our system work.

2. The en banc majority main holding is that the meaning of the statutory term "machinegun" is plain and unambiguous. In the Chevron framework, that would be a Step One determination that stops the Chevron analysis. There have been many words spent in addressing precisely what is meant by plain meaning and unambiguous to avoid the Chevron framework (or, equivalently, stopping the Chevron analysis at Step One), but I think the en banc majority's claim is that the other courts finding ambiguity means that those other just missed the meaning of the term that is so plain to this en banc majority. Everyone can agree that, when enacted in the 1930s, the statutory term machinegun did not include a bump stock which did not then even exist. But once they began to exist around 2000, I don't think it is so plain that the statutory term machinegun should not include bump stocks. This seems to be an eye of the beholder thingy, with political implications (which is what originalism is about).

3. At least in less political analysis, determining whether the statute is plain requires the use of the normal tools of statutory construction. Rhetoric aside, the normal tools of statutory construction include Skidmore respect for an agency interpretation. Skidmore v. Swift & Co., 323 U.S. 134 (1944). None of the en banc opinions cite Skidmore. (Note in this regard that Skidmore is not deference as many so-called smart judges and scholars mislabel it.  See Really, Skidmore "Deference?" (Federal Tax Crimes Blog 5/31/20; 2/14/21), here.

Tax Court in Reviewed Opinion Invalidates Notice Identifying Reportable Transactions (11/10/22)

In Green Valley Investors, LLC v. Commissioner, 159 T.C. 80 (2022) (reviewed opinion), TCPamphlet here,, TN here and GS here, the Court held that Notice 2017-10, 2017-4 I.R.B. 544 was invalid because the Notice is a legislative rule improperly issued by the IRS without notice and comment. As a result, the Court “set aside” the Notice and prohibited the imposition of § 6662A (here) accuracy-related penalties for understatements for reportable transactions identified in the Notice. The case turns upon the application of the APA requirement that legislative rules be promulgated as notice-and-comment regulations except for contemporaneous “good cause” statement or congressional exception to the notice-and-comment, neither of which the Court found to apply.

In high level overview, the question was whether the IRS must identify transactions subject to the penalty in a regulation (either Final or Temporary (interim final)) or could identify transactions in a Notice which is subregulatory guidance. The statute referred to transactions identified in regulations under § 6011. The regulations under 6011 defined reportable transaction as a transaction that is the same or substantially similar to one of the types of transactions that the IRS has determined to be tax avoidance transactions and identified by notice, regulation, or other form of published guidance. Reg. § 1.6011-4(b)(2).

The Court reasoned that the Notice which clearly was not a regulation did not meet the statutory command that the transaction be identified in a regulation. Although it included a lot more words and reasons, that is the guts of the holding. As a result, the Court invalidated the application of the penalty in the case and stated (p. 24 n. 22): “Although this decision and subsequent order are applicable only to petitioner, the Court intends to apply this decision setting aside Notice 2017-10 to the benefit of all similarly situated taxpayers who come before us.” 

This holding is a big deal. Syndicated conservation easements as they have been reported in many cases are clearly the type of abusive transactions that Congress intended the penalty to apply once the IRS identified them. The Court held that the IRS improperly identified these transactions by subregulatory guidance rather than by regulation, a procedural footfault. A lot of people clearly abusing the system will escape penalties clearly meant to apply to them and that would have applied except that the Court held that  the IRS promulgated the rule in a procedurally incorrect way.

Chevron Deference: Much Ado About Not Much (8/15/21)

This is my third offering on the most recent D.C. Circuit opinion in Guedes v. ATF, 920 F.3d 1 (D.C. Cir. 8/9/22), DCCir here,  and GS here. My prior offerings are (chronological order):  Important DC Circuit Opinion That Chevron Deference is Irrelevant if Agency Interpretation is Best Interpretation (Federal Tax Procedure Blog 8/9/22; 8/10/22), here; and § 7805(b) Time Limits Do Not Apply to Agency Best Interpretations of the Statute (Federal Tax Procedure Blog 8/11/22), here.  (Note that I omitted from my original discussion the parallel Fifth Circuit opinion in Cargill v. Garland, 20 F.4th 1004 (5th Cir. 12/14/21), CA 5 here and GS here; see Fifth Circuit Affirms Agency Best Interpretation of Statute, thus Not Applying Chevron (Federal Tax Procedure Blog 12/20/21; 12/21/21), here.)

The point I want to make here explicit that which may be only implicit in my prior offerings. When courts defer (or parties (usually the Government) argue that a court should defer) to a “reasonable” agency interpretation, they often do not differentiate between (i) those reasonable agency interpretations that are the best interpretations and (ii) those agency interpretations that are not the best interpretations but are only reasonable agency interpretations qualifying for Chevron deference.  Thus, by chanting "reasonable" and Chevron and appearing to defer, many (I think most) cases involve agency interpretations that are the best interpretations so there is no deference at all.  That is the key point of this new Guedes opinion (and the Cargill opinion). 

And, that is why courts should, as did the court in the new Guedes and in Cargill opinions, make clear what the best interpretation is so that they can either (i) apply that interpretation without any nonsense about Chevron or (ii) apply Chevron only when Chevron deference is outcome determinative – i.e., when the agency interpretation is not the best interpretation.  Keep in mind that, in making the determination as to the best interpretation, courts should give Skidmore respect (not deference) to the agency's interpretation because the agency, not the courts, has been assigned to administer the administrative scheme and is in a better position to deal with subtleties in administration than a court is.  See Really, Skidmore "Deference?" (Federal Tax Procedure Blog 5/31/20; 2/14/21).

As to the latter applying Chevron deference only when the agency interpretation is not the best interpretation, I point readers to some discussion in my article John A. Townsend, The Report of the Death of the Interpretive Regulation Is an Exaggeration  (SSRN December 14, 2021), https://ssrn.com/abstract=3400489:

In the postscript to the article (pp. 122-123) I offer the following reformulation of steps preserving Chevron's basic teaching but isolating when it is outcome determinative (footnotes omitted):

§ 7805(b) Time Limits Do Not Apply to Agency Best Interpretations of the Statute (8/11/22)

I recently posted a blog on Guedes v. ATF, 45 F.4th 306 (D.C. Cir. 8/9/22), DCCir here,  and GS here. See Important DC Circuit Opinion That Chevron Deference is Irrelevant if Agency Interpretation is Best Interpretation (Federal Tax Procedure Blog 8/9/22; 8/10/22), here. The essence of this new Guedes case is that an interpretation that is the best interpretation of the statute applies without any deference to the agency interpretation. The best interpretation controls, not because it is the agency interpretation, but because it is the best interpretation. So, for example, even if that best interpretation is in an interpretive regulation, the best interpretation controls. And the best interpretation controls even if the regulation is procedurally invalid. I have made that point (not much discussed in the mainstream claims) in several blog posts. I list only a few:  11th Cir. Invalidates Proportionate Sharing Regulations As Procedurally Arbitrary and Capricious for Failing to Address a Significant Comment (12/30/21; 12/31/21), here; Regulations Interpreting Pre-1996 Code Provisions; Fixing Hewitt (1/6/22; 1/7/22), here; and Sixth Circuit Creates Circuit Conflict with Eleventh Circuit on Conservation Easement Regulations (3/15/22), here.

I focus here on the consequences of this key point—the best interpretation of the statute controls independently of the validity or characterization of the regulation in which the best interpretation may appear. Readers may recall that § 7805(b) limits retroactivity for § 7805(a) regulations interpreting Code sections enacted after the effective date of the 1996 amendments to § 7805(b). For regulations interpreting Code sections enacted before the 1996 effective date, the interpretations may be fully retroactive to the date of enactment of the Code sections being interpreted. So, imagine a hypothetical Code section enacted after 1996, say enacted in 1997, so that § 7805(b) applies to limit the retroactivity of an interpretive regulation. Suppose that, in 2022, the IRS adopts a regulation interpreting the Code section. The regulation qua regulation cannot apply retroactively to 1997. But, the best interpretation can and should apply retroactively to 1997. (I need to clarify what retroactive means in this context; the interpretation has to be within the range of reasonable interpretations since the date of enactment so, in that sense, the interpretation is not retroactive; but the retroactive language is often used to describe the concept of the interpretation later recognized (in the example, in 2022) as the best interpretation applying from the date of enactment.)

The point is that an interpretation in a Treasury regulation (Temporary or Final) otherwise subject to the § 7805(b) time limits will avoid those time limits if the interpretation is the best interpretation of the statute.   Let me repeat that so that it sinks in:  An interpretation that is the best interpretation can and should apply retroactively without regard to § 7805(b). Indeed the best interpretation is effective even if announced in subregulatory guidance (such as Revenue Ruling or Notice). What that necessarily means is that § 7805(b)’s time limits practically apply only to an agency regulation interpretation that is not the best interpretation and thus needs a valid regulation (in this case within the § 7805(b) time limits) for Chevron deference.

This raises some questions:

Reply to Professor Hickman's Response to My PT Article (6/17/22; 6/24/22)

Note that changes may be made. I will state when the change is made. The date of the latest update is indicated in the date parenthesis in the blog's title; the last date in the parenthesis is the date of the last change.

UPDATE as of 6/24/22 1:00 pm:  Readers interested in this issue should read Professor Bryan Camp's thoughtful trilogy of Procedurally Taxing Blogs joining of the issue:  

• Bryan Camp, It's Time To Get Real: Treasury Regulations Can Certainly Be Interpretive Rules (Procedurally Taxing Blog 6/23/22), here.
• Bryan Camp, The APA Is Not A Hammer (Procedurally Taxing Blog 6/24/22), here.
• Bryan Camp, The More Things Change The More They Remain The Same (Procedurally Taxing Blog 6/27/22), here.

I have blogged here on the Administrative Procedure Act (APA) distinction between legislative and interpretive regulations. Recently, I posted a guest blog on the Procedurally Taxing Blog. Jack Townsend (Guest Blogger), More On The Confusion Surrounding The Difference Between Legislative And Interpretive Rules (Procedurally Taxing Blog 6/14/22), here. Professor Kristin Hickman posted an opposition response, strongly worded. Kristin E. Hickman, It's Time To Let Go:  Treasury Regulations Are Not Interpretative Rules (Procedurally Taxing Blog 6/16/22), here. The competing positions are academic differences of opinion between Professor Hickman and me as to the proper interpretation and application of the Administrative Procedure Act ("APA") distinction between legislative and interpretive rules. Further discussion of that difference of opinion will not be particularly enlightening to PT readers and perhaps not even to my Federal Tax Procedure Blog readers. Still, the FTPB blog is mine, and I have spent considerable blogs discussing the issue, so I decided to post my response to Professor Hickman's PT Blog on the FTP Blog rather than seeking to post on the PT Blog. I will be pleased to post verbatim as a guest blog any further comments or responses she or anyone else wishes to make that engage the discussion.

So, here is my response to Professor Hickman's PT Blog:

First, I respect Professor Hickman's scholarship and passion for the views she holds deeply. I just disagree with her.

Now to the merits of our disagreements.

I have already stated in detail in my article why I disagree with Professor Hickman's previously stated positions on this issue. The article is:  John A. Townsend. The Report of the Death of the Interpretive Regulation Is an Exaggeration (SSRN December 14, 2021), https://ssrn.com/abstract=3400489. I respond in this blog to her claims in the PT Blog entry without getting too much into the weeds. The weeds in the article required over 100 pages with copious footnotes. (A summary in 7 pages with no footnotes: is John A. Townsend, A Key Point Summary of The Report of the Death of the Interpretive Regulation Is an Exaggeration (SSRN May 11, 2022), https://ssrn.com/abstract=4089906.)

I start my article quoting Professor Hickman's claim that there are no interpretive Treasury regulations, despite the APA continuing to have that category. Her PT Blog makes the same claim. Since, as Professor Hickman has persuasively and correctly championed, there is no basis for tax exceptionalism, the same arguments she makes for Treasury Regulations have to apply to all agency regulations. That means that her argument is that the interpretive rule category for regulations has been eliminated from the APA without any legislative amendment of the APA. Thus, for example, the APA exempts interpretive rules from the requirement of notice and comment and application only prospectively, thus meaning that the interpretive regulation category still in the APA means nothing. I thought that an odd claim, particularly since the APA does not allow exceptions except by legislation expressly stating the exception.   That is the Hickman claim that I address in the article. (Clarification added 6/24/22 8:22 am:  The APA refers to "rules" rather than "regulations;" legislative rules must be notice and comment regulations; interpretive rules may be notice and comment regulations or subregulatory guidance; conventionally, discourse in this context uses the terms legislative regulations and interpretive regulations, with both categories authorized by the APA although not in those specific terms.)

I noted in the article (p. 5), in contrast to Professor Hickman's claim of the evaporation of the APA category of interpretive regulation, that, in oral argument in Kisor in 2019, Justice Breyer (an administrative law expert) said that "there are hundreds of thousands, possibly millions of interpretive regulations." That statement can be true only if interpretive regulations remain a viable APA category.

Does Professor Hickman know something that Justice Breyer does not know? Or vice-versa? At a minimum, there is confusion. I side with Justice Breyer.

I engage Professor Hickman and others on the details in my article. I therefore only address some points she specifically raised by her short PT post. Unfortunately, as we all know, responding to claims cryptically stated often requires more words than cryptic claims.

1. The original understanding of the APA's distinction between legislative and interpretive rules may be briefly stated:  

• Legislative rules are the law rather than an interpretation of an ambiguous statute. Legislative rules require an explicit grant of authority to make the law rather than interpret the law. Hence, legislative regulations were (and are) said to have the force of law as statute substitutes. Legislative rules have to be promulgated with notice and comment regulations. And, as with legislation, legislative rules generally have to be prospective. The classic tax example is the consolidated return regulations authorized by § 1502.
• Interpretive rules do not state the law but are interpretations of ambiguous statutory text; the ambiguous statutory text is the law; interpretative regulations may but are not required to undergo notice and comment rulemaking; and agency interpretations, like judicial interpretations, can generally be retroactive to the date of enactment of the interpreted statute (because the statute and not the interpretation is the law).

Guest Post on Procedurally Taxing Blog and Jack Cummings' on the APA Legislative-Interpretive Distinction (6/15/22; 6/16/22)

I posted a guest blog on the Procedurally Taxing blog site:  More On The Confusion Surrounding The Difference Between Legislative And Interpretive Rules (Procedurally Taxing Blog 6/14/22), here. The posting arose from a comment I made on the prior day’s PT blog entry by Les Book, Update on CIC Services And More On The Legislative vs Interpretive Rule Difference (Procedurally Taxing Blog 6/13/22) here. Rather than approve my comment to that earlier blog, Les suggested I offer it as a guest blog rather than a comment. So, that was the genesis of my guest blog. I thought Tax Procedure Blog readers might like to review the PT Blog entry.

I recommend Les Book’s predicate blog as context for my guest blog. In referring PT readers to my article, Les commends Jasper L. (Jack) Cummings' Letter of 4/7/22 to Editor, Tax Notes (4/18/22), here (Copyright 2022, reprinted with permission of the author and Tax Analysts).  (See Jack's bio here.)  Jack is a prolific commentator in this area of the law; over the years, Jack has substantially contributed to my education and I have cited him both in my Federal Tax Procedure Book and in articles.  I too commend Jack’s letter succinctly refuting the claim by many that penalty implications from interpretations make the interpretations legislative rather than interpretive.  One of the key points in Jack’s argument succinctly states the distinction between the APA categories of legislative rules (requiring notice and comment regulations) and interpretive rules (not requiring notice and comment regulations but often promulgated with notice and comment regulations). Here is the key discussion:

             The straightforward way to determine whether Congress has granted an agency the power to make the law is to look at the statute. If the statute says, in effect, “We’re unsure what the rule should be, so you write it,” then the rule is legislative. If the statute says, for example, that a taxpayer can deduct ordinary and necessary business expenses, and then the agency wrote a regulation stating its views on those words, those views would normally be considered to be interpretive. Many courts have shown that they’re perfectly capable of accepting or rejecting the IRS view on the meaning of those words. Put another way, if a statute states a standard that a court can interpret, then the agency’s view on that meaning is interpretive and a rule stating that view need not be issued with notice and comment.

Exactly!  Jack's statement is a variation of the distinction made before and after the enactment of the APA and still carried forward by those who are not confused by the false claims that rules interpreting ambiguous statutory text can be legislative in character rather than interpretive in character for APA purposes.  I cover all of this in my article in a lot more words.

Added 6/16/22 2:15pm:

Professor Kristin E. Hickman, bio here, has written a vigorous response in opposition to my guest post on the Procedurally Taxing Blog and my predicate writings leading to that blog.  Kristin E. Hickman, It’s Time To Let Go:  Treasury Regulations Are Not Interpretative Rules (Procedurally Taxing Blog 6/16/22), here.  Professor Hickman and I disagree.  I address all of her claims points in the article.

Chevron Spinning Uses and Abuses (4/20/22; 4/21/22)

Yesterday, I said that I would post something today on the legislative/interpretative distinction forming a key element of the decision I discussed.  On The Further Weaponization of the APA and Chevron Deference (Federal Tax Procedure Blog 4/19/22), here.  I noted that the Judge and the parties assumed that the regulation in issue was legislative.  If the regulation really is legislative for APA purposes, then it requires either notice and comment before becoming effective or, if effective immediately, then a good cause statement.  The Court held that the regulation had not been subject to notice and comment and the good cause statement was inadequate.  Hence, the regulation was invalid.

The statute in question provides (42 USC § 264(a) as quoted in the opinion):

The [CDC], with the approval of the [Secretary of Health and Human Services], is authorized to make and enforce such regulations as in his judgment are necessary to prevent the introduction, transmission, or spread of communicable diseases from foreign countries into the States or possessions, or from one State or possession into any other State or possession. For purposes of carrying out and enforcing such regulations, the [CDC] may provide for such inspection, fumigation, disinfection, sanitation, pest extermination, destruction of animals or articles found to be so infected or contaminated as to be sources of dangerous infection to human beings, and other measures, as in his judgment may be necessary.

The question was the validity of the mask mandate under this statute. The regulation was based on an interpretation of the statute.  The Judge said that the words of the statute, properly interpreted, did not support the mask mandate.  That’s an interpretive issue.  At least, I think, it is interpretive enough to justify me posting something on the APA legislative/interpretive distinction.  

On The Further Weaponization of the APA and Chevron Deference (4/19/22)

In Health Freedom Defense Fund, Inc. v. Biden, 2022 U.S. Dist. LEXIS 71206 (M.D. Fla. 4/18/22), CL here, the Court (Judge Kathryn Kimball Mizelle, Wikipedia here) invalidated a Centers for Disease Control regulation requiring travelers to wear masks in transportation hubs.  The opinion refers to this as the “Mask Mandate,” an apt description, so I will use it.  The Court applied a straightforward APA analysis (whether it did so correctly is another question).  That analysis proceeds as follows: 

First, the Court determines that the rigorous interpretation of the relevant statutory text, now in vogue at Chevron’s Step One, indicates that the “best interpretation” of the governing statute is that CDC does not have the power it purported to exercise. 

Second, the Court (pp. 25-26) rejects the argument that the agency interpretation could trump the court's best interpretation of the statute.  The Court explains:  “Chevron deference requires that courts defer to an agency interpretation of a statute that the agency administers when the statute is ambiguous and the interpretation is reasonable.”  But, based on its textual interpretation, the Court found no ambiguity necessary for agency interpretive space, thus rejecting the application of Chevron.   

As an alternative, the Court invokes (pp. 26-31) the major questions doctrine, which requires that Congress speak clearly as to the agency’s authority on systemically important issues, and it had not done so.  

Is Statutory Interpretation a Legislative Act When Agencies Do It But Not When Courts Do It? (4/8/22; 10/23/22)

I recently wrote on the Sixth Circuit’s important decision in Oakbrook Land Holdings, LLC v. Commissioner, 28 F.4th 700 (6th Cir. 2022), CA9 here and GS here. See Sixth Circuit Creates Circuit Conflict with Eleventh Circuit on Conservation Easement Regulations (Federal Tax Procedure Blog 3/15/22).  I was reading today Bryan Camp’s great discussion on this case in Lesson From The Tax Court: Penalty Approval In Conservation Easement Cases (Tax Prof Blog 4/4/22), here.  In concluding the post, Professor Camp offered this comment:

Comment: I said Judge Guy’s concurrence in Oakbrook was “ironic.”  Here's why.  Judge Guy thought the regulation was what is called a "legislative" regulation and was not an "interpretive" regulation.  While Treasury had followed the proper APA process for issuing an interpretive regulation, that process was not proper for issuing a legislative regulation.  So Judge Guy said the regulation was inoperative because it had not been validly issued.  Ok so far.  But then Judge Guy ends up construing (oh! dare I say "interpreting") the statutory language at issue.  The irony here is that Judge Guy totally agrees with the regulation on how the term “perpetuity” in the statute should be interpreted.  So the taxpayer loses.  But I doubt Judge Guy would say he was “legislating” from the bench!  Nah!  He was just “interpreting.”  Cuz that's what a court does, doncha know. Thus the irony: when Treasury does the same thing as a Court does in a regulation suddenly it’s a legislative act and not an interpretive act.  But when the Court does it, it’s just...well...interpretation.  Go figure.

This caught my attention because that precise point has bothered me.  As I note in my article, central to Professor Hickman’s argument that Treasury regulations which do no more than interpret ambiguous statutory text are legislative regulations.  This argument is embraced in many court opinions.  Indeed that is the argument I tilt against in my article John A. Townsend, The Report of the Death of the Interpretive Regulation Is an Exaggeration (SSRN last revised 12/15/21), here..  I address Professor Camp’s point at several places in my article, but the following are two most pertinent here:

First, pp. 5-6, footnotes omitted and emphasis supplied):

    At a high level, the key difference I have with Professor Hickman’s claim hinges upon whether regulations that only interpret statutory text within the range of reasonable interpretations of the statute from enactment of the statute are  legislative regulations rather than interpretive regulations. Professor Hickman claims that interpreting is legislating. If that claim is true, regulations that only interpret statutory text are legislative, must be adopted with Notice and Comment, and must be prospective in application. My opposing claim is that such Treasury regulations are interpretive regulations which the APA specifically exempts from the Notice and Comment requirement although they may be adopted with Notice and Comment (and usually are by the Treasury) and can apply retroactively. The interpretations in such regulations operate within the same interpretive space as judicial opinions. When courts interpret, they are not legislating, for our constitution does not authorize courts to legislate. When agencies interpret within that interpretive space pursuant to explicit or implicit authority to interpret ambiguous statutory text, they also are not legislating.

Sixth Circuit Invalidates Notice Identifying Listed Transaction Requiring Reporting and Potential Penalties (3/3/22)

In Mann Construction, Inc. v. United States, 27 F.4th 1138 (6th Cir. 3/3/22) CA6 here and GS here, the Sixth Circuit panel held invalid IRS Notice 2007-83, 2007-2 C.B. 960, entitled “Abusive Trust Arrangements Utilizing Cash Value Life Insurance Policies Purportedly to Provide Welfare Benefits,” which identified the transactions as listed transaction requiring participants in various categories to report the transactions and be potentially subject to penalties if they did not. The company and two shareholders (“taxpayers”) failed to report. The IRS imposed § 6707A penalties for their failures. The taxpayers apparently made no claim that they did not know of the reporting requirement. Rather, they raised only administrative law issues under the Administrative Procedure Act (“APA”) that the IRS adopted the Notice requirement without following the APA’s procedural requirements or was otherwise outside the statutory authority. 

The Court of Appeals addressed only one issue raised by the taxpayers – whether the IRS’s promulgation of the reporting requirement with penalty regime by Notice, a subregulatory guidance document, was a legislative rule that could only be adopted by notice-and-comment rulemaking. The Court held that the reporting requirement was a legislative rule, thus requiring notice-and-comment rulemaking and thus invalid because the IRS had not undertaken notice-and-comment rulemaking.

I will not attempt a detailed analysis of the Court’s reasoning. One thing I am sure of is that there is a lot of confusion about what precisely is a legislative rule subject to or exempted from the notice-and-comment rulemaking requirement. I think the Court falls into some fallacies in that regard, but won’t go down that rabbit hole here because that is a long and complex discussion, principally because of misreadings of Chevron. 

My reading that, I think, is straight-line. 

 1.  Section 6707A(a), here, imposes the penalty for failure to file a return or statement providing information regarding a “reportable transaction” under § 6011.

2.  Section 6011(a), here, in turn provides

(a) General rule
When required by regulations prescribed by the Secretary any person made liable for any tax imposed by this title, or with respect to the collection thereof, shall make a return or statement according to the forms and regulations prescribed by the Secretary. Every person required to make a return or statement shall include therein the information required by such forms or regulations.

Tax Court (Judge Halpern) Discusses Chevron and Retroactivity Issues in Significant Opinion (2/2/22)

Caveat:  The Tax Court opinion was corrected on 2/8/22 (see TC here Dkt. 86 *).  There is no indication of the changes made in the opinion.  I have checked the quotes below against the corrected opinion; they do not appear to have been revised.  I don't know whether the changes will result in new posts to Casetext and Google Scholar.  I will check later and post updates if they are made to those services.  (I earlier sent a letter to the Tax Court Clerk suggesting that, when revising an opinion, the Court provide public notice of such revisions.  See My Suggestions to Tax Court on Procedure Related Matters (11/23/20), here (noting that the Supreme Court makes the revisions available).)

In TBL Licensing LLC v. Commissioner, 158 T.C. ___ No. 1 (1/31/21), TC here Dkt. 85 *, Casetext here, and GS here, the Court (Judge Halpern) determined that inter-company shuffling of assets among related U.S. and foreign entities constituted a reorganization in which a domestic entity made a taxable distribution of intangible assets to a foreign entity. The amount of the resulting increase in income is  $1,452,561,000. (Slip Op. 91.)  It is not clear whether that is just a timing difference; in any event, I don't propose to get into the nitty-gritty on the reorganization and resulting increase in income. Instead, I offer the case to discuss two procedural issues related to issues I have discussed before on this blog.

First, in broad strokes, the case involved the statute and regulations. In part relevant here, the regulations did not apply, so the Court resolved the relevant issue solely by interpreting the statute and applying the best interpretation. There is no Chevron issue there, and the IRS did not assert Chevron deference. But TBL apparently attempted to assert something sounding like Chevron into the analysis. The Court stated its confusion about that (Slip Op. 79-80):

            Petitioner suggests that respondent is to blame for the absence of a provision in the regulations that can be applied to petitioner's circumstances. The absence of an applicable regulatory provision, however, requires that we look to the statute alone to determine the tax consequences of petitioner's transaction. For the reasons explained supra part III, section 367(d)(2)(A)(ii)(II), interpreted in accordance with the legislative history, requires petitioner to recognize gain. The absence of a provision in the regulations providing otherwise is petitioner's problem — not respondent's.

            Because respondent's position is grounded in an interpretation of the applicable statutory provisions and not on any regulations, we do not understand petitioner's argument that respondent's "litigating position" is "impermissible" under Bowen v. Georgetown University Hospital, 488 U.S. 204 (1988). Bowen stands for the proposition that an agency's litigating position is not entitled to the same deference a court would give to a position adopted through notice and comment rulemaking. See id. at 212-13; see also Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 842-43 (1984). Respondent does not ask that we grant Chevron deference to the interpretation of the applicable statutes that he advances in this case.

11th Cir. Invalidates Proportionate Sharing Regulations As Procedurally Arbitrary and Capricious for Failing to Address a Significant Comment (12/30/21; 12/31/21)

Subsequent blog entry adding some procedural nuance:  Regulations Interpreting Pre-1996 Code provisions; Fixing Hewitt (Federal Tax Procedure Blog 1/6/22), here.

In Hewitt v. Commissioner, 21 F.4th 1336 (11th Cir. 2021), 11^th Cir. here and GS here, the Court invalidated regulation § 1.170A-14(g)(6)(ii) denying charitable donations of partial interests (such as easements) for conservation purposes if the deed requires that, upon extinguishment, the proceeds be shared between donor and charitable donee ratably to the value between the conservation easement and the donor’s retained property rights as of the time of the donation.  Specifically, the regulations did not permit in that sharing calculation, the subtraction of value of post-donation improvements incurred by the donor.  Such subtraction, if allowed, would allocate that portion of the value exclusively to the donor rather than sharing with the charitable donee according to the date of donation values).  The Regulation interpreted the § 170(h)(5)(A) requirement that:

(A) Conservation purpose must be protected
A contribution shall not be treated as exclusively for conservation purposes unless the conservation purpose is protected in perpetuity.

Two issues are potentially implicated.

(i)              Was the regulation properly promulgated under the procedural requirements for regulations in the Administrative Procedure Act (“APA”)?  Those requirements include a statement of purpose addressing significant comments in the Notice and Comment process (sometimes called Reasoned Decisionmaking) which may be tested under the APA’s arbitrary and capricious standard under 5 USC 706(2)(A).  This is sometimes referred to as the State Farm test.  Motor Vehicles Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983).  This test is a procedural regularity test only and, as to interpretations in the regulation, do not test the validity of the interpretation.  (Thomas Merrill, a noted scholar, has suggested that Reasoned Decisionmaking or some variation including a reasoning concept is better called “process review,” to avoid confusing it with the ambiguous requirement of “reasonableness,” which is the deference test for an interpretation. Thomas W. Merrill, Re-Reading Chevron, 70 Duke L. J. 1153, 1171-1172 (2021); process review seems to focus better on the inquiry into the procedural validity of the regulation.).

(ii)            Was the interpretation in the regulation a valid interpretation either because it is the best interpretation of the statute (regardless of deference) or, if not the best interpretation, subject to Chevron deference?  Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984).  In this regard, a Notice and Comment regulation interpretation adopted in a procedurally invalid way is not entitled to Chevron deference but should still carry the day if it is the best interpretation of the statute.  BTW, this is why an interpretive regulation differs from a legislative regulation; if a legislative regulation is procedurally defective or even does not exist, there is no law in the statute to apply; if an interpretive regulation is procedurally defective or does not exist, there is still the statute a court can apply based on its best interpretation.  For example, the quintessential tax legislative regulations are the consolidated return regulations; if there are no consolidated return regulations or they are procedurally invalid, there is no law for consolidated returns; by contrast, most tax regulations are interpretive regulations where if there were no interpretive regulations or if the interpretation in the regulations were not valid (qua interpretation), there would still be the statute which the court could interpret to resolve the dispute.

The 11^th Circuit held in Hewitt that the regulation failed the procedural regularity test in (i) above because, in adopting the Final Rule, Treasury failed to consider and discuss a material significant comment regarding the extinguishment formula as to whether the value of post-donation improvements by the donor must be shared with the charitable donee.  Failing the procedural regularity test, the regulation was invalid thus precluding any Chevron deference.  Had the regulation passed the procedural regularity test in (i), Chevron deference might have been an issue.

FinCEN Adopts Immediately Effective Final Rule Omitting the Regulations Statement of the 2004 Willful Penalty Prior to the 2004 Statutory Amendment (12/26/21)

Readers may recall that the FBAR willful penalty, as amended in 2004, provides a maximum penalty of the greater of $100,000 or 50% of the amount in the account on the reporting date.  31 U.S.C. §5321(a)(5)(C).  Prior to 2004, the maximum willful penalty was $100,000.  After the 2004 amendment, FinCEN did not amend the regulation, 31 CFR § 1010.820(g), to reflect the change in the statute.  After the amendment, creative lawyers pursued the argument that, by leaving the regulation in tact, FinCEN exercised its discretion under the amended statute to maximize the FBAR willful penalty at $100,000 and thus could not assert a higher penalty under the amended statute.  That argument finally failed.  E.g., Norman v. United States, 942 F.3d 1111, 1117-1118 (Fed. Cir. 2019).

FinCEN has deleted subsection (g), thus eliminating any confusion (real or feigned) about the effect of the statutory amendment.  The Final Rule states that it is immediately effective on the date issued (12/23/21).  See 86 FR 72844, 72844-72845, here.

I have no idea why FinCEN took so long to make that deletion.

JAT Notes:

What is the effect of stating an effective date of 12/23/21?  Why didn’t FinCEN just state that the effective date was the 2004 amendment effective date?  Certainly, the deleted subsection (g) had been effectively deleted by 2004 amendment, as recognized by the court opinions prior to 12/23/21.

While I can't provide a definitive answer as to FinCEN's reasoning, I will step through my analysis.:

Fifth Circuit Affirms Agency Best Interpretation of Statute, thus Not Applying Chevron (12/20/21; 12/15/22)

On 12/21/21 and 12/15/22, significant additions by adding paragraphs 3, 4 and 5 to JAT Notes below.

In Cargill v. Garland, 20 F.4th 1004 (5th Cir. 12/14/21), CA 5 here and GS here,  the Fifth Circuit panel sustained the ATF regulations interpretation of the statutory term “machinegun” to include bump stocks.  Judge Higginson for the unanimous panel reasoned that the interpretation was the “best” interpretation.  On that holding, Chevron deference was irrelevant, for as the panel noted (p. 1009 n. 4):

   n. 4 Cargill also argues that if the statute is ambiguous, the Bump Stock Rule is not entitled to deference under Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), reasoning primarily that Chevron does not apply to cases involving criminal statutes and that ATF explicitly waived Chevron in the district court. Because we conclude that bump stocks are "machinegun[s]" under the best interpretation of the statute, we do not address whether the Rule is entitled to deference. See Edelman v. Lynchburg Coll., 535 U.S. 106, 114 (2002) (explaining that "there is no occasion to defer and no point in asking what kind of deference, or how much" would apply in cases where an agency has adopted "the position we would adopt even if there were no formal rule and we were interpreting the statute from scratch")

In my recent update to the article titled The Report of the Death of the Interpretive Regulation Is an Exaggeration (see SSRN here), I presented this phenomenon as a category (which I call Category 3) where courts do not defer to the agency interpretation. I presented this category with others to show the limited application of Chevron deference.  That discussion in the article is presented in the Postscript to the article at pp. 118–124, which starts here; the Postscript only may be viewed and downloaded here.

The panel noted the state of play on the bump stock rule at the time of the decision as (p. 1006 n. 2):

   n2 Three other circuits have also rejected challenges to the Bump Stock Rule. In April 2019, the D.C. Circuit denied a motion for a preliminary injunction against the Rule, concluding that the statutory definition of "machinegun" is ambiguous and that the Rule is entitled to Chevron deference. Guedes v. Bureau of Alcohol, Tobacco, Firearms & Explosives, 920 F.3d 1 (D.C. Cir. 2019) (per curiam). One judge dissented, arguing that the Rule contradicts the statute's plain language. Id. at 35 (Henderson, J., dissenting). The Supreme Court denied certiorari, 140 S. Ct. 789 (2020), though Justice Gorsuch issued a statement arguing that the Rule is not entitled to Chevron deference. Id. at 789-91 (Gorsuch, J., statement regarding denial of certiorari). In May 2020, the Tenth Circuit denied another motion to preliminarily enjoin the Rule, for similar reasons as the D.C. Circuit. Aposhian v. Barr, 958 F.3d 969 (10th Cir. 2020). Four months later, the Tenth Circuit vacated that opinion and granted a rehearing en banc, 973 F.3d 1151 (10th Cir. 2020) (en banc), but it subsequently reversed course, vacating the order granting rehearing en banc and reinstating the original panel opinion. Aposhian v. Wilkinson, 989 F.3d 890 (10th Cir. 2021) (en banc). Five judges dissented from the decision to vacate the en banc order. Id. at 891 (Tymkovich, C.J. dissenting, joined by Hartz, Holmes, Eid, and Carson, JJ.). The plaintiff in that case has filed a petition for certiorari in the Supreme Court. Petition for Writ of Certiorari, Aposhian v. Garland, No. 21-159 (U.S. Aug. 4, 2021). Finally, in March 2021, a Sixth Circuit panel granted a preliminary injunction against the Rule, holding that the Rule is not entitled to Chevron deference and is not the best interpretation of the NFA. Gun Owners of Am., Inc. v. Garland, 992 F.3d 446, 450 (6th Cir. 2021). However, the Sixth Circuit vacated that decision, 2 F.4th 576 (6th Cir. 2021) (en banc), and an evenly divided en banc court affirmed the district court's judgment upholding the Rule. No. 19-1298, ___ F.4th ____, 2021 WL 5755300 (6th Cir. Dec. 3, 2021) (en banc); see Gun Owners of Am. v. Barr, 363 F. Supp. 3d 823, 826 (W.D. Mich. 2019).

The Court also held (pp. 1013-1014) that, since its best interpretation of the term “machinegun” did not present an ambiguity, the rule of lenity did not apply.

JAT Notes:

Final Update of Article on APA, Legislative and Interpretive Regulations, and Chevron (12/16/21)

I have posted to SSRN a major update of my prior article titled The Report of the Death of the Interpretive Regulation Is an Exaggeration.  The update is dated December 14, 2021.  The Abstract summarizing the scope of the article is here.  The Abstract offers links to view or download the article.

This will be the last update for this article.  (There was one update before this.)  If there is something new that I feel appropriate to discuss in an article on SSRN, I will write a new article.

CAVEAT:  The Abstract has two problems that I do not know how to fix:

1. As of this morning, the Abstract has a concluding paragraph that I cannot delete for some reason.  That concluding paragraph is carried over from the last update and does not apply to this update.  I have posted a revision for the Abstract that, when approved, will caution that, if there is text below that point, it is a vestige and readers should ignore that concluding paragraph.  The following is the concluding paragraph that readers should ignore:

Note: The principal revisions in the draft linked here are discussions of Supreme Court cases in June 2019. I did make some other minor corrections as well. This "final draft" of the article replaces one originally posted June 6, 2019. I have made substantial revisions to the earlier draft. I do not have plans for further revisions, although I will likely make substantial revisions on this subject to the more summary presentation in my Federal Tax Procedure books (Practitioner and Student Editions) posted on SSRN.

2.  The SSRN suggested citation for the article states my author name twice as if there were joint authors of the publication.  As it appears now, the suggested citation is:

Townsend, John A. and Townsend, John A., The Report of the Death of the Interpretive Regulation Is an Exaggeration (December 14, 2021). Available at SSRN: https://ssrn.com/abstract=3400489 or http://dx.doi.org/10.2139/ssrn.3400489 

The corrected citation in SSRN suggested format should be:

Townsend, John A., The Report of the Death of the Interpretive Regulation Is an Exaggeration (December 14, 2021). Available at SSRN: https://ssrn.com/abstract=3400489 or http://dx.doi.org/10.2139/ssrn.3400489

Actually, the citation that I prefer uses the current convention of identifying the author with first name first:  

John A. Townsend. The Report of the Death of the Interpretive Regulation Is an Exaggeration (SSRN December 14, 2021), https://ssrn.com/abstract=3400489